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Californians Are Paying More in Taxes So LeBron James Can Play Basketball with Bugs Bunny

Hollywood, just like Amazon, shops around for massive deals from the government that the rest of us have to pay for.

LeBron JamesGary A. Vasquez/USA TODAY Sports/NewscomCalifornians pay some of the highest tax burdens in the nation (even Politifact agrees). On the November ballot, state leaders begged citizens to protect a recent gas tax increase or else the state's highways and bridges would crumble away (in reality, a lot of that money is being siphoned off to a whole bunch of special interest mass transit projects of dubious public value). Three other November ballot initiatives asked California citizens to approve general obligation bonds for projects totaling billions of dollars. Two passed, committing residents to more debt.

But after insisting that it needs every nickel and dime we can give up in order to keep the state's infrastructure from collapsing, it is, of course, turning around to give hundreds of millions of dollars in tax breaks to its richest industrialists: Hollywood filmmakers.

The heavily overtaxed worker bees in California are going to have to make up the difference for the revenue the state will not be getting from the production of Warner Bros. Bugs Bunny/Looney Tunes branding and marketing festival known as Space Jam 2. The blockbuster has been granted up to $21.8 million in tax credits from the state of California. The Los Angeles Times notes that it's the second largest grant from the program, which is currently scheduled to sunset in 2025. The Transformers spinoff, Bumblebee, which will no doubt be a fiscally successful, narratively incomprehensible car crash of a movie, was granted up to $22.4 million in credits.

The California Film Commission gets to hand out $330 million in these credits every year. It used to be $100 million a year, but the pool was dramatically increased in 2016, in an effort to attempt to lure movie and television production back from other states like Georgia. Much like the recent Amazon HQ2 competition, it's a race to see which governments can give the best bribes to the nation's wealthiest to convince them to do business there. (Though to be fair, California's budget would be absolutely hosed were it not for its wealthiest residents.)

Yet, despite the obvious comparison to the Amazon HQ2 coverage and criticism, Times writer David Ng doesn't seem to want to bite into or even so much as question any claims that these tax breaks are beneficial job creators for Californians. He notes in his coverage that the tax breaks can recoup the costs of salaries for crew and set production but cannot be used for star salaries or high-end compensation. But this is an absurd claim. Money and budgets are fungible creatures. If Warner Bros. knows that they're going to recoup $21.8 million in expenses on crew, that inherently frees them up to offer more money to LeBron James to lure him in to pretend to play basketball against a dude in a motion capture outfit that will eventually be animated to become a space monster. This program does, in a roundabout fashion, subsidize the costs of stars' salaries.

This system of tax breaks is the government at its most intrusive in selecting winners and losers. Major film studios get to suck up 35 percent of the available funding. Indie features get a measly five percent. And even then, there are obviously more projects that would like to have access to these credits than the state is able to award given the size of the pool. So these big budget blockbuster pictures from studios that are rolling in money—Captain Marvel and Top Gun: Maverick are among the beneficiaries—are getting these breaks while smaller competitors may be frozen out (Hollywood Reporter has the latest list of winners here).

And, of course, California's state spending is not being reduced at all to account for this annual loss of tax revenue, is it? This means that, fundamentally, those of us who live in California have to make up this revenue gap, including those who are connected to film and television shows who did not get these tax credits! All those roads and bridges that Warner Bros. won't be paying for because they're organizing a basketball game on Mars or wherever are just going to be paid for by others.

Libertarian Rep. Justin Amash (R-Mich.) posted an excellent Twitter explainer in June about the fiscal problems and the fundamental unfairness of these kinds of tax credit deals and has been pointing back to it in response to what Amazon is getting from Virginia and New York for its new offices. He puts it in simpler terms than I do here, but it should be obvious that massive tax breaks for major movie blockbusters do not benefit the citizens of California when the state is drowning in debt and pension commitments and leaders are openly looking for mechanisms to try to extract even more money from everybody else. Amash's example applies here as well.

Bonus link: Reality shows like The Bachelor travel around the country looking for financial incentives to shoot episodes there. I explain why the claims that these tax breaks and sometimes direct subsidies produce "economic activity" are bunk and take note of the hidden costs that people don't like to talk about.

Photo Credit: Gary A. Vasquez/USA TODAY Sports/Newscom

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  • Don't look at me!||

    Stories about California get funnier and funnier all the time.

  • ||

    Just not 'ha ha' funny.

  • Liberty Lover||

    Well California's government is a bit cartoonish.

  • Brandybuck||

    It's not just California. A lot of states have entertainment industry subsidies so they can get movies make in their state.

  • loveconstitution1789||

    Tax breaks are not subsidies.

    sub·si·dy
    /ˈsəbsədē/
    noun: subsidy; plural noun: subsidies
    1. a sum of money granted by the government or a public body to assist an industry or business so that the price of a commodity or service may remain low or competitive.

  • ||

    Refundable tax credits are subsidies. The do not simply offset tax owed, they payout cash over and above any assessed tax obligation.

    I don't know about the ones in this article but it is my understanding that most of the tax credits offered in the various state film making schemes are of the refundable variety.

  • Robert||

    How many $ are actually paid out to someone who's not paying at least that much in some other tax?

  • Kivlor||

    Honestly, even tax deductions can be subsidies when those deductions are specifically tailored to only be applicable to one group. If you only let a few people take advantage of it, you're giving them a subsidy. Which is not the same as "if only a few people can afford to take advantage of it".

    A hypothetical example, if you produce a movie, and my state says "we'll give you a tax deduction up to $1,000,000 on your state taxes if you produce it in our state" that is a subsidy, even if it isn't "above the assessed tax obligation". You're absolutely subsidizing the movie, just not to the same degree as a tax credit would.

  • Dillinger||

    Californians *volunteer* to pay some of the highest tax burdens in the nation

  • CDRSchafer||

    Why waste it on something stupid like food and shelter when you can save the planet?

  • damikesc||

    Always amazing what people would rather have than money.

  • Weigel's Cock Ring||

    Like gay butt sex in West Hollywood for example.

  • Sevo||

    Any bets on where LeBron "lives"?
    Pretty sure it takes 6-months and a week to establish an out-of-state residence and avoid meat-head's Millionaire Tax.

  • Chipper Jones||

    You give our state too much credit my friend. CA is a "facts and circumstances" jurisdiction for tax purposes, meaning that you could live here one day and the state could decide all your income are belong to California.

  • Eddy||

    "Ain't I a stinker?"

    /Hollywood

  • Brandybuck||

    But if taxpayers don't give Hollywood a subsidy, then Hollywood will just end up making their movies in Canada!!!

  • ||

    "...Times writer David Ng doesn't seem to want to bite into or even so much as question any claims that these tax breaks are beneficial job creators for Californians. He notes in his coverage that the tax breaks can recoup the costs of salaries for crew and set production but cannot be used for star salaries or high-end compensation."

    "As God as my witness, I thought turkeys could fly." Mr. Carlson.

  • loveconstitution1789||

    Haha. Commifornia.... No sympathy from me.

    In fact it will be even funnier when Census 2020 takes House seats from Blue states like California and hands them to Red states like Georgia.

    More power for Georgia and less power for Taxifornia.

  • Rev. Arthur L. Kirkland||

    Why would California lose seats? Has its rate of population growth become lower than the national average?

  • TuIpa||

    "For many years, more people have been leaving California for other states than have been moving here. According to data from the American Community Survey, from 2007 to 2016, about 5 million people moved to California from other states, while about 6 million left California. On net, the state lost 1 million residents to domestic migration—about 2.5 percent of its total population. "

  • Paulpemb||

    California gets lots of immigrants from outside of the country, though (legal and illegal), so their population continues to go up.

  • TuIpa||

    That is actually in debate at the moment. The numbers I saw while researching that answer show either a very small net gain, zero gain, or a small net loss.

    In short, yes, they will be losing seats.

  • Rat on a train||

    California's percentage of the population is declining.

  • TuIpa||

    Thank you, that was my point.

  • Rat on a train||

    I don't believe it's enough to lose a seat. They had a streak of gaining seats from 1930 to 2000.

  • loveconstitution1789||

    Kirkland does not know who the electoral college works nor how House seats are apportioned according to Article I, section 2 of the US Constitution.

  • loveconstitution1789||

    House apportionment

    I'll throw Kirkland a biscuit.

  • BestUsedCarSales||

    I feel like there should probably be more Representatives overall. Just under a million people per Rep seems like too many. I think it could be better as more local representations at the federal level.

  • CDRSchafer||

    I think we should get rid of all the ones we have first. Spring cleaning.

  • Enjoy Every Sandwich||

    And supposedly Democrats are opposed to corporate welfare. I reckon it's not what you say, it's what you do.

  • ||

    Democrats say they are opposed to corporate welfare but always seem to find a way to pay out subsidies to save jobs or protect workers.

    Republicans say they are opposed to corporate welfare but except for a few stalwarts seem to choke when put to the test when asked to abolish any of it.

    The voters demand it, the politicians deliver it.

  • ||

    Republicans get blamed for corporate welfare but there isn't a single corporate welfare bill in the contry that does not include at least one proud Democrat parent.

    And almost every time that Republicans have tried to eliminate (and for the most part they are the only ones that ever do) corporate welfare they are condemned by the Democrats as heartless enemies of the working class and most of them fold and give up.

  • Dori_G||

    While I generally oppose subsidies on principle, we all agree that exceptions must be made for films as culturally vital as Space Jam 2.

    Dori
    www.LittleLibertarians.com

  • TuIpa||

    That's cool, but what does it have to do with the tax breaks which are not subsidies from this article.

  • Alan Vanneman||

    All these incentive programs are examples of what "recovering Republican" Chris Ladd calls "white socialism", programs that help the advantaged rather than the disadvantaged. The original "great" New Deal programs, like Social Security, were specifically tailored to exclude as many black people as possible, though of course millions of hapless poor white people were excluded as well. "Big government" only stopped being popular with the white working class when liberals started focusing their efforts on helping the poor, blacks in particular. Ron Paul's "quit letter", circa 1986, explaining why he could no longer remain in Ronald Reagan's Republican Party, excellently explains how libertarian-talkin' Ronnie learned to walk the white socialism walk.

  • CDRSchafer||

    Yes, no one helps poor black people like Democrats do. Why look how outstanding they're doing in Democrat run cities.

  • BigT||

    Dems trade - how did Nancy put it - crumbs, for their perpetual allegiance at the polls. Not exactly slavery, but damned cheap labor.

    If a great pension is a set of golden handcuffs, these welfare programs are fools gold handcuffs.

  • Uncle Jay||

    Well, who in California wouldn't be willing to spend billions of dollars to watch LeBron play basketball with Bugs Bunny?
    That's what California is all about!
    Fantasies and wasting the taxpayers' money.

  • Pastor Arthur M. Kirkland||

    The bigoted, regressive wing of the libertarian movement is out in full force today. While Hitler, Jr. is busy blowing his nose on the Constitution and terrorizing Americans of color, you goons are whining about Lebron James. Why don't you just call him the N-word? We all know that's what you really want to do.

    History will bury you. Right-wing libertarianism minus racism equals ZERO.

  • loveconstitution1789||

    MAGA!

  • BigT||

    It's not like the public is paying for their places of business!

    Oh, wait...

  • Weigel's Cock Ring||

    Basically every single libertarian and quasi-libertarian organization I'm aware of ranks California either dead last or very to it on their freedom index.

    Which kind of makes you wonder why in the world any self-professed "libertarian" would ever want to live there these days. I know the obvious and easy answer is "the weather and beaches are awesome", but there are other states like Florida that also have great weather and beaches and are way more free in so many ways.

  • Fairbanks||

    Florida does not have great weather, compared to California. High humidity, high nighttime temperatures and rain are big differences. And Florida has bothersome insects. SoCal doesn't. If you're retired and out everyday, they don't compare. Yes, the progressiveness sucks, but it's not a daily nuisance.

  • ||

    Yes, if I could afford it California would be my choice.

    Unfortunately my grandfather's second wife's relatives got the house in Solana Beach so I hve to settle for Florida. :(

  • Weigel's Cock Ring||

    Yes, the progressiveness sucks, but it's not a daily nuisance.

    Not sure how in the world anyone could possibly say this with a straight face right now, considering that state is burning out of control on both the north and south ends because the progressive assholes refuse the allow the land to be managed properly.

  • Marcus Aurelius||

    Maybe if Reason put it's money where it's mouth is, and got the hell out of California, I could feel sorry for you. But it's a bit ironic, posing as a libertarian magazine headquartered in a communist enclave.

  • Kivlor||

    Libertarians should totally get on board with the Free State Project, and get out of oppressive places they live in, moving to New Hampshire so we can get a real Libertarian state going and show the world how well our ideas work in practice.

    What's that you say, why won't Reason Foundation move to New Hampshire? Oh, no, that kind of talk is for the plebs. We don't actually believe in libertarianism. Plus, we'd have to move out of the big city, and everyone knows that life in smaller towns is terrible. That's why it's important for us to force our politiks down the throats of the yokels.

    What, that's not libertarianism you say? Well, if that's not libertarianism, I don't know what is. --KMW probably

  • Weigel's Cock Ring||

    This. I'm pretty sure that Welchie Boy would kill himself before he'd ever voluntarily live anywhere in New Hampshire!

  • Robert||

    Cause & effect not established.

  • ||

    Taxation is theft by gov of some, approved by most, for a few parasites. The less some pay, the more money is in private hands, which is better than in the gov who uses our money against us.
    The gov taxes all it can, regardless of the budget, of expenses. Less revenue collected does not put a greater burden on others, the amount stolen is not related to expenditures.
    A decade study of the relationship of revenue to performance in public ed showed a 5 fold increase resulted in less, not better results. Also, the states with the higher taxes may have a worse infrastructure. How can this? In the public sector, there is no accountability, or worse, less performance gets rewarded with more revenue, performance declines, getting rewarded again, etc.
    The worship of authority is not open to reason. It continues despite all evidence of its destruction. It breeds chaos.

  • loki||

    Taxifornia at it again. Imagine that.

    Learn to swim.

  • CE||

    Tax breaks aren't a subsidy. they're a gentleman's agreement to rob certain people less than others.

  • majil||

    Article should have read as one sentence . " California sucks and the people living there are idiots"
    enough said.

  • Duelles||

    Ha Hahaha! Everyone pays more in taxes so that I can retire in style. Medicare and Social Security taxes that flow directly into my pocket allow me to keep that IRA growing tax free and use my tax loses from 2008 ( massive, I tell you) to live damn near (income) tax free. No wonder so many asylum seekers want to come to America

  • Richard Rider||

    Offsetting the CA tax credits -- and further discouraging CA movie-making -- is the confiscatory CA 13.3% millionaire's state income tax on earnings in California -- even if one's tax residence is elsewhere. In recent years, many Hollywood movie stars and moguls have quietly relocated their "tax residence" to other low tax states. Indeed, for the wealthy, ALL states are low tax, compared to Taxifornia.

    California has by far the highest personal state income tax rate -- 34% higher than the 2nd highest state. Indeed, we also have the nation's 2nd highest rate. And the 3rd. And the 5th! In addition, CA has the 2nd highest total capital gains tax rate in the WORLD (trailing only Denmark).

    Movie firms producing CA movies must pay our CA corporate state income tax of 8.84% -- the highest west of Iowa. Moreover, there was a bill in the state legislature to more than DOUBLE that tax rate -- from 8.84% to a breathtaking 18.84%. The message for business is clear -- avoid California.

    While TV shows are still produced in the Golden State, the movie industry has left the building.

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